31 December 2004
By AFP

LONDON (AFP) - Sri Lanka and the Maldives are likely to suffer the heaviest economic consequences from the tsunami wave disaster, with bigger economies in the region better placed to withstand the fallout, analysts said.

The economies of India, Indonesia, Thailand and Malaysia were in a strong position to overcome the tragedy, they added, as the death toll from the deadly waves soared well past 100,000.

"While the tourist sector is a similar size of both Indonesia's and Sri Lanka's economies, the impact is likely to vary considerably," economists at the emerging markets bank Standard Chartered wrote in a research note.

"In Indonesia the main tourist areas of Bali and Lombok are not impacted. In contrast, the extent of the devastation on Sri Lanka suggests its tourist sector and economy will be hit harder.

Waves flooding male, Maldives

"Given the size of the economies and the scale of the disaster, it is the Maldives and Sri Lanka that are worst affected in economic terms, although all countries will be impacted."

Travel and tourism represents both directly and indirectly 74.1 percent of the gross domestic product of the Maldives and 10.8 percent of Sri Lanka, according to figures from the World Travel and Tourism Council.

This compares with figures of 14.7 percent for Malaysia, 12.2 percent for Thailand, 10.3 percent for Indonesia and 4.9 percent for India.

The credit-rating service Standard and Poor's predicted that the region's tourism sector would "bounce back" in the medium term, noting that the economies affected had a history of great resilience in the aftermath of setbacks and that investment for reconstruction would help.

Analyst Ping Chew at the agency estimated that the effects on the economies of south and southeast Asia "will be muted by the inevitable rapid reconstruction of the devastated areas".

He explained: "The human losses are tragic and huge, but the dents to the countries' gross domestic products will be smoothed by the spike of investment for reconstruction, and return of tourism to most areas."

French corporate rating and credit insurance firm Coface agreed that the economic fallout would in general be "limited".

"Tourism will obviously be much affected but these are diversified economies, in which you have textiles, agriculture, biotechnology and industry," he told French radio.

"The infrastructure of industry and the service sector were unaffected by the catastrophe and these have been the most dynamic areas in recent years."

Nevertheless, Standard Chartered economists estimated that the tsunami disaster could lop 4.0 percentage points off GDP (news - web sites) growth in the Maldives in 2005, after a rate of 5.5 percent this year.

Sri Lanka could see its growth reduced by 2.0 percentage points in 2005, India by 0.4 points, Thailand by 0.7 points, and Indonesia and Malaysia by 0.2 points, they added.

"For the region in general, the rebuilding process will be greatly helped by the current economic and political climate," the economists wrote.

"Following three years of strong growth, the economies of India, Indonesia, Thailand and Malaysia are in a strong position to overcome the tragedy. For these countries, recent growth has been strong, fiscal positions have improved and external reserves are high."

Help is also coming in the form of aide and possible debt relief.

French President Jacques Chirac said France would push for a Paris Club moratorium of debt for some of the devastated countries.

That proposal, already raised by Germany, is set to be discussed at the next meeting of the organisation of creditor nations in Paris on January 12.